The Publishing War

Since I wrote my review of the Kindle DX in the previous post, quite a lot has happened in the little world of electronic books and publishing. Namely, one large publisher and one large retailer seem to have lost their collective minds and declared all-out war on each other. And in the process, they are dragging authors and readers down into the mud with them. There is quite a bit of anger on all sides, and so, as a (somewhat) neutral observers of the book world, I thought I'd chime in with my own summary and my own opinion.

Here's how it went down. On Wednesday, January 27th, Apple announced their long-awaited new tablet computer: the iPad. The iPad is a 10-inch touch based computer, basically an iPod Touch scaled up to giant proportions. Part of the new feature set of this tablet, which should be available for purchase in two or three months from now, is an integrated book reading application and electronic book store, called iBook.

Unlike the Kindle, the nook, the Sony Reader and other true eReaders, the iPad is a standard LED-lit color LCD screen – the same type that your television and computer monitor use. For most of us who rely on an eReader, this technology doesn't seem very well suited to reading... but we'll just have to wait and see what the market decides. At $499, the iPad is a wonderful multimedia device – although an awfully expensive book reader.

Prior to announcing the iPad, Apple apparently negotiated some special deals with at least 5 of the "Big Six" publishers. Skipping over the accounting details, to the end user of an iPad, Apple's deal means that new "hardcover" books will be $14.99 or $12.99 in electronic form from the iBook store. That sounds awfully expensive, considering that actual hardcovers cost just about exactly that same amount right now. And it sounds even more expensive compared to Amazon... which jumps through a lot of hoops, including selling a number of books at a loss, to keep prices at $9.99 per book and below.

A reporter from the Wall Street Journal, Walt Mossberg, asked Apple CEO Steve Jobs afterwards if this was going to be a problem. Jobs said no, because "the prices [for books] would be the same". Initially, this was taken to mean that Apple would match Amazon's $9.99 price. Within two days, however, it became clear that Jobs meant nothing of the sort. Instead, he had it on good authority that the publishers would in fact be forcing Amazon to raise their price to match Apple's.

Let's move forward to Friday, January 29th. Two days later. On that day (or perhaps the day before) the publisher Macmillan gave an ultimatum to Amazon: They had to immediately accept a new deal, under the exact same terms as their deal with Apple. And a key part of that deal meant that Macmillan, not Amazon, got to set the price of each and every book. You see, Macmillan felt that $9.99 was way too cheap for an electronic edition of a book, and wanted to make certain that Amazon could not sell at that price – not even if Amazon was willing to take a loss on the book. Amazon, being the largest retailer of books on the planet, did not take kindly to being told how to run their business, nor how they should set their prices. Macmillan said it was a "take it or leave it" deal.

So Amazon, as of that evening, pulled all Macmillan books from their web site. Both printed and electronic.

And the Internet went insane.

Authors published by Macmillan immediately put up articles and blog posts raking Amazon over the coals. Two prominent science fiction authors, John Scalzi (whose work I don't care for) and Charles Stross (whose work I am a big fan of) were particularly vocal, claiming that Amazon is, more or less, pure evil, and certainly stupid. Almost every single author took the publisher's side in this little war.

Readers, on the other hand, were furious at Macmillan and praised Amazon to the skies. They felt Macmillan was being extremely greedy, trying to force a retailer to bow to their will, and was engaging in a very obvious example of price collusion with their new partner Apple.

Anyone who's ever read comments on any web site knows how quickly tempers can get out of hand. By Saturday, certain readers were vowing to permanently boycott certain authors. Some authors were vowing to never give Amazon any support ever. Some readers who vowing to never read any book published by Macmillan or any of its imprints. Very little in the way of reasonable arguments could be found in these comments, but you could find quite a lot in the way of four-letter words and over the top anger.

By Sunday, Amazon caved. They released a statement saying, in effect, that they were capitulating to Macmillan, and would have to raise the prices of any Macmillan imprint electronic book to whatever Macmillan wanted them to charge. And slowly, slowly, they began restoring Macmillan books to their online book store.

The war is not over, however, not by a long shot. During the next week, several other publishers immediately jumped and said they, too, wanted Amazon to agree to the same terms. The same terms they'd already agreed to with Apple, that is. The only exception was the largest of them all: Random House. Random House, in fact, stated that they wanted to let Amazon price however they wanted to, and planned to leave things the way they are. Notably, Random House is the one large publisher that did not sign on to supply e-books to the iPad. Also notably... the spokesperson for Random House used to work for Amazon.

As a fan of books, reading, and writing, I've read as much as I can stand to on this subject. The truth is... nobody comes out smelling rosy in this situation. Amazon definitely acted like a petulant child by cutting off all sales for Macmillan books; this act didn't hurt Macmillan corporate a bit, while it hurt its authors and Amazon's customers a great deal. And Macmillan was acting equally childish: they just got a new deal they liked, so they wanted to force their biggest retailer to accept the same terms.

The Supreme Court recently ruled that corporations have all the same rights in the constitution as actual people do. However, I think Amazon and Macmillan have demonstrated that corporations are, at best, children. And as such, they are not capable of making rational decisions and planning carefully for their future. They consider that sticking their tongues out at each, holding their breath until they turn blue, and taking all their toys and going home are all good business ideas. What a shame.

My personal view on all of this... well. I have always maintained that a purely electronic copy of anything is not worth as much as a physical copy. An album on a CD is worth more than an album downloaded from iTunes. A DVD of a movie is worth more than a copy of a movie purchased online. And a physical book is worth more than an electronic one.

Trying to price an e-book the same as a printed book is pure folly. It will never work, at least not in the long term. My gut tells me that an e-book should be about 25% less than whatever the current printed copy (either hardcover or paperback) price is. If you look on Amazon, most new hardcovers sell for between $15.00 and $12.00. So, frankly, $9.99 for an electronic version sounds exactly right. And, as a reader, that's definitely my impulse buy limit. Any book that sounds halfway decent, as long as it's under $10, I'll probably give it a shot. Over $10? Well... I have to want to read it pretty bad.

I'm not saying I'll never pay more than $9.99 for an e-book, but I will say that it will be rare. Right now, for instance, there are several books that I'd like to read on my Kindle (such as Kim Stanley Robinson's new novel Galileo's Dream), but they're in Wish List Limbo at the moment, waiting for their price to drop below the $14 or $15 they're at right now.

However, certain timely books, like political tell-alls, I can see ponying up $14.99 to read right away. Right now, instead of a higher price, many publishers are delaying the e-book version of these titles by several months, under the assumption that this will force people to run out and buy the hardcover. In fact, I'd like to read The Politician, Andrew Young's account of John Edwards – but they publisher has delayed the e-book version until April. And that's not the kind of book I'm willing to pay for a hardcover of. So, looks like I'll be passing on it. You see? They just lost a sale by delaying the e-book. A sale they would have made if they'd just allowed the book to come out in electronic form, sold to Amazon for whatever they wanted to, and allowed Amazon to sell for whatever they want to.

in the long run, I don't think this will work. As the years go buy, more and more people will read books in some electronic form versus a hardcopy form. I'll predict that within 10 years, the split will be 50/50.And as more people read electronically, the price pressure will become even greater to lower the price as compared to the hardcopy version. When that happens, Macmillan and the other publishers who got suckered into Apple's "agency pricing" model are going to wish they could go back to the old days.

Watch Random House laugh all the way to the bank in a few years.


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